MARKHAM – Equipment supplier and telecom contractor Cygnal Technologies this week reported first quarter revenues of $26.8 million, down 12% compared to the first three months of 2006.
Gross margin of 21.8% was relatively flat compared to 21.9% for the same period a year ago and selling, general and administrative expenses declined by 20% to $6.8 million.
The cost-cutting meant EBITDA improved to a loss of $1 million versus a loss of $2 million in the previous year. Net loss was $2.5 million, compared to a net loss of $3.3 million during Q12 ’06.
"I believe we remain on track to achieve our previously stated revenue and profitability targets for the fiscal year," said Jos Wintermans, president and CEO, in the press release. "While first quarter revenues were lower than we had anticipated, EBITDA was consistent with our expectations, indicating that our cost structure is firmly under control. We are seeing improvements across most of our individual business lines and in fact we are looking at expanding our sales force in order to take advantage of opportunities we see in the marketplace."
Breaking down the company into its divisions, network operations revenues declined by $3 million to $14 million, primarily due to the absence of the NRBN contract and other large projects for which revenue was recorded a year earlier. Communications services revenues decreased by $700,000 to $12.8 million, due to a lack of product availability and the impact of management changes late in 2006, says the press release.
The communications services group includes supplier White Radio.
On May 2, 2007 Laurus Master Fund provided Cygnal’s network operations business a 30 day, secured overadvance loan of US$1 million. The division is in negotiations with Laurus for a US$2 million convertible note financing to provide additional working capital and support current and future growth in receivables. "Cygnal anticipates this additional financing will be completed in May 2007. As at March 31, 2007, Network Operations had fully utilized its US$9.5 million line of credit with Laurus," says the press release.
Despite the revenue drop in Q1, Cygnal’s release said its guidance for 2007 "remains unchanged at 5% to 10% revenue growth over 2006 and an EBITDA(1) estimate of $3 million to $6 million. Communications services has a history of profitability and, with enhancements to its operational processes, anticipates improvements in service and lower costs. Management is currently enhancing its sales force across the country to improve its ability to leverage the significant growth opportunities in both the network operations and communications services businesses," reads the release.
